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What is the Difference Between Accidental Death and “Regular” Life Insurance?

by Scott G on October 27, 2012

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Accidental Death Insurance vs Life Insurance


There is a huge difference between owning an accidental death policy (also called accidental death and dismemberment policy if the policy includes living benefits) and having a standard “life insurance policy” such as term or permanent life insurance.

Accidental death policies only pay out the death benefit you if you die as result of an accident. Typical classifications of accidents include but are not limited to: auto accidents, poisonings, falls, fires and chocking. Deaths from natural causes such as heart disease, cancer and old age are not covered under an accidental death policy. Also, there are usually a number of exclusions on an accidental death or AD/ADD policy that would prohibit one from receiving the death benefit. For example, if it is determined that an individual was doing something illegal or reckless at the time of the death, the death policy would not award a payout to the beneficiary.

A term or permanent life insurance policy, on the other hand, typically covers most types of deaths when your beneficiary submits a claim and produces the death certificate. There are only two major exclusions on a life insurance policy. The first is a two-year suicide clause; meaning that if the policy holder commits suicide in the first two years of your policy, the death benefit would not be paid out to the beneficiary. The other common exclusion is a two-year contestability clause on almost all life insurance policies. This means the life insurance company reserves the right to investigate or even deny the death benefit based on the grounds of misrepresentation on the application during the first two years of the policy being in effect. However, if it is determined that the policy was procured through fraudulent means, the two-year window of time is not applicable, and insurance companies can investigate or deny benefits regardless of how much time has elapsed since the policy was activated.

So why would someone choose an accidental death policy over a term, universal or whole life policy? The most common reason is that there are factors such as health issues or extenuating circumstances that are preventing the applicant from easily obtaining traditional life insurance. Often times, if an applicant has a major health concern, such as heart disease or cancer, he/she may have problems getting approved for life insurance or at least at a reasonable rate. Also, many insurance companies require a certain time period of documented stable health after recovering from an ailment or life threatening condition before they will provide coverage at an affordable rate. In addition to health concerns, there are other circumstances that may prevent or limit an applicant from obtaining a standard term or permanent life insurance policy. Accidental death policies may be the only option for individuals dealing with situations involving certain bankruptcy problems, driving or occupational factors. Many times these individuals become eligible for standard policies once the said issues/circumstances are resolved.

Accidental death polices can be a lot less inexpensive than term or permanent insurance policies simply because they do not offer as much coverage. Because they do not cover death by natural causes, a health exam is not required as part of the approval process. Also, accidental death policies typically have a double indemnity clause, meaning that if death occurs on a common carrier of an accident, like on an airplane, in a taxi cab etc., it can pay double the death benefit.

Nevertheless, for most people it is recommended that qualified applicants procure a standard term or perm life insurance policy rather than an accidental death policy.  As mentioned earlier, since a term or permanent life insurance policy typically covers most causes of death, with only the two major exclusions, it is generally the preferred choice and offers more comprehensive coverage and security.

So, even you are initially declined for life insurance or given a much higher premium than you anticipated, that doesn’t necessarily mean that an accidental death policy is your only option. Every insurance company will assess things differently.  One company may decline you for your particular situation, such as being on insulin for diabetes or having heart disease while another may not only approve you, but also offer a good rate! You are advised to consult with a different agent or company to get a second opinion. Many times, you will be surprised to discover what alternatives are available through other providers. Also, it is recommended that you work with an independent agent or company that can shop for your specific situation or condition to the top companies in order to secure you the best offer on the market.

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